Dear Client,

Life as a farmer is always interesting, challenging and uncertain.  New opportunities and new risks emerge, sometimes at the same time.  We have seen this with the crash in the price of grain, resulting in a disappointing year for croppers, but an unexpected relief for dairy, pig and poultry farmers and lot feeders.  Milk prices collapsed but have finished the year 30% higher than they started and are still heading up.  The rapid increase in the price of sheep meat and wool has improved sheep gross margins markedly.  It has also placed a sharp focus on the importance of lambing percentages, with 10% extra lambs resulting in a valuable increase in gross margin and farm profit.  Unfortunately the cattle industry has not experienced significant price increases, and cattle gross margins are generally considerably less than for most sheep enterprises.

Added to price fluctuations is the ongoing uncertainty about weather.  Bureau of Meteorology statistics indicate that average temperatures are rising, and there is uncertainty about a possibly changing climate.  Right now however many (but not all) clients are experiencing their best autumn in years and there is 1.5 million MgL of water reportedly heading down the Darling River.  Good news for many irrigators.

As usual, the challenge for all of us is to take advantage of the opportunities emerging, while managing the risks that are ever present.  Farm business plans need to be prepared in order to do this.  The plans need to identify and evaluate the opportunities as well as recognising and managing the impacts of risks.  I notice there has been quite a flow of articles in the press over recent weeks re the proposed new Drought Policy.  We are told that Tony Burke (Minister for Agriculture) is going to phase out the interest rate subsidy but that some new grants will become available.  But interestingly, we are told farmers must have first prepared a business plan which takes account of drought risks, in order to access the grants.  Perhaps we will find out what is really happening once the budget is announced.

So, if you are interested in us assisting you with farm business planning you may be able to still apply for a Professional Advice and Planning Grant of $5,500 to pay for professional advice and planning.  For all clients who are still in EC declared areas, (i.e. all of Victoria with the exception of West Gippsland and south west Vitoria) you can still apply for a Professional Advice and Planning Grant.  We has previously advised that you only had until 31st March to apply but that deadline only applies to West Gippsland and south west Victoria.

News from GRDC Advisors Update

I recently attended the GRDC Crop Advisors Update (two days in Ballarat).  In this newsletter I share some of the interesting information and ideas presented at the conference.

1.  The Outlook for Crops – Mick Keogh

Factors Affecting Demand 

• Population Growth

The world’s population continues to grow rapidly, by approximately 70+ million pa.  As a country’s average income moves from $5,000 (US) to $15,000 (US) pa, people rapidly move to consuming more animal protein, particularly pork and poultry.  In India and China average incomes are just moving from $5,000 to $7,000 pa.  Animal protein demand is consequently increasing and this in turn increases the demand for feed grains.  China’s population consumed 400 cal / day in 1990 – it now consumes 600 cal / day. 

• Increased use of Bio-fuels

In 2007 5% of cereals, 9% of oil seed and 10% of sugar was used for bio-fuels.  This will increase by 30-50% by 2020.  Population growth, combined with bio-fuels will see demand for grains increased by 2- 2.5% pa.  To date, supply has kept up with demand.

Factors Affecting Supply

• Availability of arable land

The US had 300 million acres available in 1980.  It now has ~250 million acres.  Globally however, the area cropped has increased significantly between 2001 and 2009.  This increase is coming from sub Saharan Africa and South America.  The world has large, potentially croppable areas which are not currently tapped into.  The rate of yield growth in crops is now less than what is was.  In the 1960s it was 3.6% pa, now it is 1.4%.  A 2°c increase in temperature (from global warming) will see the loss of some cropping lands, but it will also allow the cropping zones of the northern hemisphere to expand and it could increase world supply of grain.

• Long Run Summary

Overall, there is a strong picture for crop prices in the years ahead.  Crop prices however remain more vulnerable to volatility, e.g. a drought in a major producing country could result in sharp increases in price.

2.  New test provides better guide to crop responses

Fertiliser costs are a major crop input (and also for pasture).  On average, the cost of P accounts for around 15% of crop input costs.  Consequently is it important that we apply P when we are confident of the crop response it will achieve.  To date, Olsen and Colwell P tests have provided a guide, but one that does not strongly correlate with yield responses.

A new technology has been developed by Lancaster University UK called the Diffusive Gradient Test (DGT). This, in combination with the Phosphorus Buffering Index (PBI), can be used to decide a recommended rate of application which shows a high degree of correlation (76%) to expected yields.

Although the technology is already showing good results in trials, it is not likely to be commercially available until 2013.

New Farmer Training - Farmer Client Services Course 

"Achieving Farm Business Success in a Risky World"

Alan Blackburn and Associates Consulting is proud to be working with the Victorian Farmer’s Federation to offer a new two day, Farm Ready course, “Achieving Farm Business Success in a Risky World”.

Achieving Farm Business Success: Course Topics

• Being proactive and knowing what you want to achieve,
• Knowing your current financial position,
• Developing plans that capture opportunities,
• Developing plans for managing risks,
• Evaluating a range of scenarios for moving forward,
• Choosing the path ahead.

Participants to the course receive a copy of “Farm Business Planner” Software - Version 5

Alan Blackburn and Associates Consulting has developed this software over a five years period and we are proud of its capacity to model a farm business and evaluate the options and scenarios that farmers typically face.  Enrol in this course and you will receive a copy of the software for your personal use.  You will use it during the training and learn how to plan your farm, prepare budgets, evaluate opportunities, decide the likely impact of key risks and choose a path for the future.

Course cost can be fully reimbursed through Farm Ready

The course is registered with Farm Ready and the full cost ($1390) can be reimbursed through Farm Ready.  Click the “more info” to get more details on how to register with Farm Ready to obtain the reimbursement grant.  Farmers and their immediate family each, individually, can apply for and receive the grant.

Get a group of three or more and we will run the course for you!

Like to do the course?  Well get together with two or more other people and we will run the course in your local area.  Generally we aim to run the courses at a local cooperating Community Education Centre, but we can run them at a home if need be.  The course if often of value for a farming family.  The success of a farm often impacts the wider farm family.  The older generation relies on the farm to provide a retirement income.  The younger generations rely on it to support growing families, and to ultimately provide an inheritance.  It’s best if all concerned attend the training.

Best wishes

Alan Blackburn  &  Will Winter

Alan Blackburn & Associates Consulting